BT : Homebuyers reeling from Beijing property measures

Business Times - 17 May 2010

Homebuyers reeling from Beijing property measures

One such measure is barring people who have not paid taxes

(BEIJING) Accountant Jiao Yurong carefully organised her family's finances to put her son through university in the United States.

Now that he has the coveted degree, she has been saving to buy him a flat.

But soaring property prices in China - and a series of moves by the government to rein them in - are throwing a spanner in the 50-year-old mother's plans, and she admits she does not know how to proceed. 'Just when we had saved enough for a down payment, prices surged,' Ms Jiao, a Beijing resident, told AFP.

'The policy is so unstable . . . I'm so confused.' Ms Jiao is not alone. Prospective home buyers are reeling from a series of measures put in place by the Chinese government to curb rocketing prices amid persistent fears about a ballooning bubble in the real estate sector.

Authorities have tightened restrictions nationwide on advance sales of new property developments, introduced new curbs on loans for third home purchases and raised minimum down payments for second homes.

The Beijing city government has gone even further, limiting families to one new apartment purchase and barring people who have not paid taxes or made social security contributions in the city for one year from getting home loans. 'Sellers have started to lower the prices,' said Hu Jinghui, vice-general manager of 5i5j, a real estate agency chain that has around 600 outlets in eight cities across China. 'But the buyers are still waiting.'

At the Beijing Real Estate Expo last month, the average price of a new apartment in the city was around 21,164 yuan (S$4,302.7) per square metre, double that of last year, state media said. That means a 90-square-metre apartment in Beijing would cost 1.9 million yuan, compared with the average per capita income of 26,738 yuan in 2009.

Since the capital put in place austerity measures on April 30, prices have dropped an average 10-15 per cent, with the number of home purchases slumping by 50 per cent, according to Mr Hu.

Jack Guan, a securities firm executive from the coastal city of Qingdao, searched last year on the outskirts of Beijing for his first home, but said he could not make a deal as prices 'went insane'.

'I am going to wait and see. I think this is an approach that many people have adopted as now there is a possibility for a price cut,' said the 27-year-old. 'It will not cost me much if I wait for another two years.'

In 2008, China also introduced a range of policies to dampen the market frenzy, but a government stimulus package to prop up the economy during the financial crisis quickly negated any progress made.

The new measures so far seemed to have had a limited effect, as official data showed last Tuesday that prices in major Chinese cities rose 12.8 per cent in April, a double-digit rise for the third straight month.

Analysts also said the rules contained apparent loopholes that could be exploited by speculators.

China lacks a nationwide database on property sales, which means banks have no way of checking if mortgage applicants already own apartments in other cities. And higher down payments will have little impact on speculators who mostly pay the full value of properties in cash.

State media reported last Friday that people are even briefly resorting to divorce to acquire a second property, taking advantage of lower down payment and interest rate benefits offered to first-time buyers before remarrying.

Ms Jiao said she was often told the properties she was interested in were sold out, leading her to suspect the developers were hoarding to keep prices high.

'The government has always been saying they would keep the policy unchanged. But they changed it whenever they wanted. We ordinary people just cannot do anything,' she said.

Mr Hu however, said he believed the government was more determined this time around to hold firm, as prices had become so out of reach for many ordinary Chinese that the measures were needed to keep a lid on social discontent.

Lina Wong, managing director for east and south-west China of real estate firm Colliers International, said even more tough measures could be expected as curbing price rises had become a 'political task' for the ruling Communists. -- AFP

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